Monsters of Rock: Pilbara Minerals continues to grow production in face of weak lithium price

Pilbara Minerals sets plans to lift guidance in FY25, but strong June quarter means it could be ‘conservative’
Iron ore miners solid despite brief price drop below US$100/t
Gold stocks lead the ASX materials sector

Pilbara Minerals (ASX:PLS) has maintained plans to robustly grow production at its Pilgangoora lithium mine in WA, posting FY25 guidance of 800-840,000dmt of 5.2% Li2O at costs of $650-700/t despite an FY24 impacted by a radical 74% slide in spodumene prices.

The EV metals supplier produced a record 226,200t in the June quarter, selling 235,800t at an average price of US$840/t, and 725,300t produced with 707,100t of sales at $1176/t across FY24.

That came in at unit operating costs on a delivery to China basis of US$537/t ($818/t) for the year and US$483/t ($733/t) for the quarter, with major capital projects including its 680,000tpa and 1Mtpa expansions, due for completion next September, seeing its cash balance slide from $3.3bn to $1.6bn over the course of the past 12 months.

PLS’ average price fell from $4447/t of spodumene to $1176/t from FY23 to FY24 as oversupply and a reduction in EV sales growth hurt lithium miners, with revenues down 69% on the year from $4.064bn to $1.254bn.

But PLS remained strongly cash flow positive in a weak price environment, pulling in a cash margin of $59m after mine development and sustaining capex costs, with revenue up ~60% in the June quarter to over $305m on the production lift.

It has also put early numbers around a proposed plan to expand to 1.9Mtpa from 2028 via a further investment of $1.2bn.

PLS MD Dale Henderson said on a conference call today that EV sales growth remained robust “despite the headlines”, suggesting negativity in the EV narrative had been distorted by a media focus on the (currently) relatively small US market.

“The bottom line is some of the doomsday headlines just don’t reconcile with the broadly strong growth markets that you can see,” he said.

Henderson said higher cost suppliers were being shifted out of the market and being replaced by production from larger, lower cost suppliers like PLS with access to capital getting tighter for new developers.

“Which of course could set up good conditions for ultimately a potential price run in the future,” he said, noting that many new African supply sources were ‘cost constrained’.

Henderson said intel he’d received suggested standalone lepidolite and artisanal miners were coming out the market in China due to falling prices, with most producers still operating being those held within integrated battery producers.

RBC’s Kaan Peker said in a client note it was a strong finish to the year for Pilbara, noting its output was well above guidance of 660-690,000/t, and saying FY25 guidance appeared conservative compared to its June quarter.

Iron ore miners hold strong

Meanwhile, the big iron ore miners held the fort, all finishing softly in the green to weather the storm of a brief dip below US$100/t for Singapore futures yesterday.

They did have their customary post-dip rebound today, back up to US$100.60/t at the time of writing.

Also on the ASX report card was Iluka Resources (ASX:ILU), hit by almost 5% as first half mineral sands revenue fell 14.9% YoY in the first half to $606m.

The miner revealed it was still in discussions with the Federal Government on funding measures for its Eneabba Rare Earths Refinery, where costs have blown out to $1.7-1.8bn, beyond the scope of a $1.25bn low cost Canberra loan announced in 2022.

Copper producer 29Metals (ASX:29M) saw its shares rise ~4% after lifting copper output drom 5800t in the March quarter to 6400t in June, with zinc output rising from 4700t to 15,300t and gold and silver output also higher at the Golden Grove mine in WA.

The copper output was a record under 29M’s ownership, with all in sustaining costs also down from US$4.81/lb to US$2.83/lb.

Among other reporters Aurelia Metals (ASX:AMI) was down after reporting production of 19,100oz of gold at $1277/oz (an improvement in costs from $2697/oz in the March quarter), though positive news it had beaten FY24 guidance at over 65,000oz of gold was already baked in.

Catalyst Metals (ASX:CYL) was up 8.5% after boasting record production of 31,502oz from its Plutonic and Henty gold mines at an all in sustaining cost of $2338/oz for the June quarter.

It has $37m in cash and only $8m in debt in the form of a gold loan after repaying $11m in the quarter, while its hedges have been cleared meaning CYL has full exposure to near record spot prices.

West African Resources (ASX:WAF) said it was on track for full year gold guidance after producing 107,644oz at AISC of US$1223/oz at its Sanbrado mine in Burkina Faso in the first half.

Gold prices moved higher overnight, with bullion delivering the big winners.